Maximizing Unit Economics for Profitable Growth in Ecommerce

– Unit economics involve levers that can be pulled to make a product profitable or break even.
– Word of mouth and positive experiences are key for brand growth.
– Reduce customer acquisition cost (CAC) and pass the savings on to customers to increase product sales.Invest a portion of your monthly budget into organic marketing and reduce your customer acquisition cost (CAC) to pass the savings on to customers by lowering product prices, ultimately increasing the number of products in customers’ hands.I’ve touched on unit economics in the past, but I don’t think people really understand what I meant. There are levers you can pull with unit economics, and at the end of the day, your job number one is to get the product in people’s hands profitably or even break even until you’re large enough to drive organic traffic for 50% of your revenue. If you make a product that is good and positively viewed by a community with a good repeat purchase rate, do everything you can to get the product in hands. Word of mouth plus a positive experience is how brands grow. Within unit economics, pretty much every step is variable: cost, retail price, and CAC. Cost is the hardest to influence, which leaves retail price and CAC. Now you want to start with a competitive but decent retail price, then you want to work backwards to understand a discount to CAC ratio that results in the most amount of products in hand while being profitable. So really, if you want to think about this from a customer journey and company journey perspective, you should strive to spend as much money on the customer rather than your ad platform. The swap is reducing CAC from your baseline while passing those savings on directly to your customer to increase products in hands at the top of the funnel. But Jon, I want my CAC to go down so I can profit more! Get better at organic marketing and profit more. But that takes time. Take one-third of your monthly budget and start investing it off of paid ads, seriously, just do it. (I say this knowing most won’t) For example, starting CAC was $50, and the product price was $50. If you can reduce CAC by $20, you can reduce the price by $20. So if you can reduce CAC to $30, you can reduce the price of the product to $30 and net out the exact same. You’re passing the savings directly on to your customer while making all $50 back on the next purchase. You’ll sell more at the lower price point too. Crazy, I know, but not everyone will come back, that’s OK, it’s not about everyone coming back, it’s about getting the product in hands, collecting feedback, and constantly improving while getting your name out there. Very few brands are known to everyone, and it takes them years to get there. The majority of them will never be household names, be good with this.

To the tactical.——————————————————————Here’s the framework we use to test
– Set up duplicate products of your best sellers at lower price points
– Limit the cart to 1 of them per item
– Only drive traffic to these pages from select paid traffic campaigns for clean comparison
– Use a popup with logic mapping and data collection to present that offer to them
– Do not use a discount, rather gate access to the offer
– All while keeping the offer separate from search engines

You’ll be able to look at the sell through of specific products in your inventory.

No idea what I’m talking about? We haven’t actually talked yet? Reach out, let’s chat.#math #ecommerce #data

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